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GDP of Germany and Poland fails expectations (Daily analysis 14.02.2019)

14 Feb 2019 11:46|Bartosz Grejner

Germany avoided recession and the eurozone's GDP is as expected, but that is it in the case of positive factors for the euro. Poland's economic growth slows down and records the weakest result in more than two years.

The most important macro data (CET - Central European Time). Surveys of macro data are based on information from Bloomberg unless noted otherwise.

  • 2:30 p.m.: Retail sales in the USA in January (estimate for the headline index: +0.1% month-on-month; estimate for the core index: 0.0% month-on-month).
  • 2:30 p.m.: Initial jobless claims submitted in the USA last week (estimates: 225k).

Recession was a close call

Strongly anticipated preliminary data of German GDP for Q4 turned out to be bittersweet. On the one hand, Germany escaped recession in the last three months of the year, as Destatis' reading showed a stagnation in economic growth (which is relatively positive, given the significant fears of the market that a slowdown may have occurred). On the other hand, the market consensus assumed growth of 0.1% quarter-on-quarter. Besides, the Federal Statistical Office itself, during a conference held a month ago, stated that the German economy recorded slight growth in Q4, which, however, did not turn out to be true.

On an annual basis, the growth of 0.9% was in line with the majority of economists' expectations, but the seasonally-adjusted growth of 0.6% was 0.1 percentage point below expectations. Shortly after the start of the European trading session, the EUR/USD quotations fell to about 1.1250, which is the lower limit of this pair in the last three months.

The data for the eurozone, published three hours later, did not fail expectations. The GDP growth was 1.2% per year and 0.2% quarter-on-quarter. Although this is a very weak result, the lack of negative surprise may give the euro a bit of break. Following the Eurostat publication of GDP data, the EUR/USD quotations rose to about 1.1280.

End of the Eldorado in Poland?

In turn, initial data on Poland's GDP for Q4 indicated that the economy grew at a pace of 4.8% year on year. However, the quarter-on-quarter growth was only 0.5%, the lowest since Q3 2016, and 0.2 percentage points below market expectations. The economic slowdown in the eurozone, stronger than previously expected, has also clearly affected Poland, which may have a negative impact on the already weakened zloty.

The zloty basket remains weak all the time, and today's data on the GDP by the Polish Central Statistical Office (GUS) does not give any support. The EUR/PLN exchange rate still remains around 4.34, and USD/PLN reached 3.86 today in the morning - i.e. the highest level since May 2017. For the zloty, similarly to the euro, macro data readings for January will be particularly important. If they are as weak as those at the end of 2018, both currencies may depreciate significantly, especially when accompanied by the dollar appreciation and an increase in US Treasury bond yields.

14 Feb 2019 11:46|Bartosz Grejner

This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without acknowledgement of the source is prohibited.

See also:

13 Feb 2019 16:21

Inflation in the US surprises (Afternoon analysis 13.02.2019)

13 Feb 2019 13:05

The worst production data since the Great Recession (Daily analysis 13.02.2019)

12 Feb 2019 16:13

Zloty and euro pare the losses (Afternoon analysis 12.02.2019)

12 Feb 2019 13:29

Dollar strongly appreciates (Daily analysis 12.02.2019)

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